Does Cameron dare ditch poor-bashing green energy?

Analysis No 10 has a dilemma: it is committed to an unpopular renewable energy policy that punishes the poor, British industry, and will keep inflation high. But is it edging nervously away from the policy, or merely pretending to?

The Telegraph has obtained a policy document, dated July, that seems to suggest that the government is considering a walk away from the most expensive renewables – and now we can see the full copy online. Two No 10 advisers challenge the Department of Energy and Climate Change's utopian cost predictions, and say energy bills will be much bigger than we've been told.

What isn't in contention is that energy itself will be much more expensive. DECC's argument is that we'll all start insulating our homes more – so our utility bills won't reflect the higher per-unit energy costs. No 10's energy expert thinks this is nonsense.

The Cameron advisors also suggest that government policy should be "open" to ditching some of the most expensive renewables – such as offshore wind power.

What's the real cost of wind and solar?

The former power director of the National Grid, Colin Gibson, now estimates that the lifetime per unit cost of onshore wind is £178 per megawatt hour (MWh), and offshore wind at £254/MWh. Nuclear is £60/MWh. The figures DECC provides don't account for the huge additional transmission costs of wind.

Note how much more expensive reality is than the clean, green vision. Government figures reckoned onshore wind cost £55/MWh and offshore wind £84/Mwh – cited by the John Muir Trust here – compared to gas at £44/Mwh. Politicians seeking to dump the renewables policy could argue that green-minded civil servants sold them a pup. They'd be right.

The Downing Street memo makes Business Green editor James Murray nervous; he says it will "send a shiver down the spine of low-carbon investors who, after years of uncertainty, have professed themselves broadly happy with DECC's proposals".

But opinion differs on how significant the memo is. For some, it is the first sign of a retreat from the current green mania for renewables at any cost – one promoted by DECC. This is a fashion particular to Europe – the emerging BRICs economies are simply ploughing on regardless with whatever works – and in the short-to-medium-term, that means lots of coal. (Not all renewable energies are basket-cases; hydroelectric fulfills most of Norway's needs, of course, and long-term geothermal is highly promising. For new build, ground-source heat pumps can be a useful supplement. But the renewable build out today means wind and solar – which means vastly more expensive than if the market chose the cheapest energy for consumers).

Guardian warrior Damian Carrington thinks the memo doesn't necessarily augur a policy shift. Or perhaps, he hopes it doesn't. For Carrington, the leak is merely a sop to the Conservative conference, and underneath Cameron's blue rosette, there still beats a green heart.

Green heads talking

Given the background of the pair of advisors bending Cameron's ear, he might be right. Ben Moxham was policy director of the alternative energy unit at BP, until it was shut down in 2009, and also worked for the renewable energy investment outfit Riverstone, run by former BP chief John Browne.

"Downing Street is happy with Moxham's shortlisting by the civil service, pointing to his experience heading up the alternative energy department at BP under Browne. The government regards its energy policy increasingly to be the implementation of the kind of renewables agenda Moxham took charge of when at BP," the Guardian helpfully told us in March.

Binning green power would be like printing money - without inflation

And Gila Sacks, daughter of Chief Rabbi Jonathan, was special adviser to Gordon Brown – and another political appointment on the taxpayer's tab. Neither have the background or inclination to take on the environmental establishment – because they're part of it.

Green scientists (and civil servants) tend to come with an agenda

In the No 10 document, M&S take on DECC's numbers. They suggest that gas prices will remain high in 2020; there's no accounting for the possibility of cheap shale gas from Poland, the continent, or even from the UK itself. In the US shale has already depressed prices.

Green policies "would increase household electricity prices by 25 per cent in 2015 and 30 per cent in 2020 compared to what they would have been in the absence of policies", the authors note. This climate change surcharge is even higher if gas price falls, as it can be expected to should new excavation technologies be deployed – such as the fracking and horizontal drilling used to tap into shale gas.

"Can we open some of our policies, particularly support for relatively high-cost technologies such as offshore wind, in a way that minimises cost and disruption to investment?" they ask.

The briefing actually is quite timid, but what else should we expect?

This is a row between green civil servants, of slightly differing hues of green. DECC's chief scientific advisor is Professor David Mackay – author of the popular download Sustainable Energy Without the Hot Air (interviewed here). MacKay likes solar, doesn't like coal or nuclear power (while acknowledging its effectiveness) and on his watch as Chief Scientific Advisor, DECC has overlooked the implications of shale and thorium. He's deeply skeptical about synthetic hydrocarbons.

Ditch renewables, win votes

The energy story isn't quite going to script, however. When the policies were devised (or in the case of EU renewable obligations, adopted) in the past few years, the working assumption was that the public would accept them as the inevitable part of the battle against Global Warming, in a kind of stoic "Keep Calm and Carry On" British way.

But the issue has faded as the defining political drama of our time, the international process has failed, and other countries are simply charging ahead, prioritising economic development over low-carbon policies. The civil servants and scientific advisors failed to see fuel poverty coming. As Ben Pile writes here: "The Government and the DECC did not anticipate a doubling of the levels of 'fuel poverty' between 2004-9. 5.5 million — more than a fifth of all UK households — now have problems finding money to pay their bills."

Yet we know what the benefits of cheap energy are.

Cheap energy lifts the poor out of poverty in several ways. Low energy costs make food and transport cheaper, too. Cheap energy lifts the economy in the short term, by adding to the discretionary income of every household - money is spent on goods and services. In the long-term, too, economic growth reflects energy costs.

But the biggest benefit of an immediate reduction in household bills would be an instant electoral dividend. There are few other measures – I can't think of one – that can make a household a thousand pounds a year better off at a stroke, and yet are fiscally neutral. There are certainly politicians opportunistic enough to make the promise.

Throwing today's expensive renewables overboard – or relegating them to a small symbolic part of the energy mix – may actually be something politicians can't resist. It's like printing money to give it away, without the threat of inflation. ®